During his 13-year reign as the head of Mexico's Sinaloa drug cartel, Joaquin "El Chapo" Guzman transformed his business from a modest marijuana operation into one of the richest, most powerful organizations in the world – legal or otherwise.
El Chapo's capture on Jan. 8, 2016 also ended an extraordinary chapter in the history of law enforcement, one that saw U.S. DEA agents match wits with an international criminal genius every bit as creative, sophisticated, and intelligent as they were.
Drug cartel leaders may be uneducated in the traditional sense, but as the agents pursuing them know all too well, they are wily strategists and extremely sophisticated business people. Because their business depends on identifying and exploiting loopholes in the world's legal and financial systems, they hire the brightest talent they can find to help them achieve their goals, and pay them extraordinarily well.
Cartels hire teams of computing specialists to hack into data networks along with savvy, talented attorneys to help them skirt the legal system. They work with accountants to exploit the banking systems in the United States and Europe. They employ expert engineers to help them build sophisticated tunnels, watercraft, and other equipment needed to process and smuggle their product across borders. And they have technical specialists that can monitor law enforcement communications networks, allowing them to stay one step ahead of the authorities.
Drug traffickers also have a key advantage over law enforcement: They are not bound by rules, regulations, borders, or constitutions. This freedom from social constraints allows them to do whatever a particular situation requires.
Money is any drug cartel's ultimate goal, which is why a large part of the federal manhunt for El Chapo involved tracking the Sinaloa cartel's financials around the world, in particular all the ways it sought to launder its profits. Even though El Chapo is in jail, the Sinaloa cartel continues to make so much money that one of its biggest challenges is finding ways to convert that revenue into usable currency.
The U.S. banking system is at the center of these laundering efforts. Once illegal money is deposited in a U.S. bank, it is much easier to transfer and hide behind the smoke screen of an apparently legitimate business enterprise. That said, the Sinaloa cartel has invented numerous money-laundering strategies. They prefer a shotgun approach, and use every method they can to stretch the resources of law enforcement as thinly as possible.
Of the many money-laundering methods utilized by drug cartels, "structuring" – depositing amounts smaller than $10,000 to avoid Bank Secrecy Act (BSA) reporting regulations – is the most popular, even though it's also the easiest form of money laundering to detect. Structuring is the most common reason Suspicious Activity Reports (SARs) are filed by banks, but it's also the most direct way to get money into a U.S. bank account. To push the odds in their favor, drug traffickers hire a veritable army of people to deposit small amounts of cash in banks all over the country, in cities large and small. Many get caught, but to the cartels, that's simply the cost of doing business.
The United States was El Chapo's largest market, which presented him with a special set of problems. Once his drugs were smuggled into the U.S. and sold, he had to somehow launder the money. If he couldn't get the money into a bank, he had to figure out how to move it back across the border to Mexico and launder it, or use another strategy besides structuring to deposit it. In one scenario, undeposited cash was smuggled in bulk to Mexico, then shipped back to the U.S. in armored vehicles, using a loophole in declaration rules for armored cars to make the money appear legitimate.
One of the most effective ways to clean large amounts of cash is through what is known as "trade-based money laundering," a technique El Chapo developed into an art form. The simplest trade-based method is to convert money into a commodity. Drug traffickers do this by buying such easily sold items as clothes or electronics from a legitimate company in the U.S., and then selling the items on the other side of the border for pesos. The money is now effectively clean, and can be used for regular commerce.
Trade-based money laundering can involve sophisticated wage scams to move money electronically, or be conducted using old-school methods such as double booking. Trade-based laundering requires a business, preferably a legitimate one, that is willing – knowingly or not – to take illicit cash in exchange for goods. Agents who are trying to identify businesses that are operating as money-laundering fronts look for changes in funding patterns, such as a business that has historically done everything by wire transfer shifting to large cash deposits, or a business that shows a sudden spike in profits for no apparent reason.
One infamous example involving El Chapo's Sinaloa cartel was a 2014 sting in the L.A. fashion district that had 1,000 law enforcement officers executing 75 arrest warrants simultaneously. In that case, the cartel was exploiting the immigrant-heavy garment industry's laxness toward transaction reporting requirements for businesses operating in the United States. This allowed the cartel to buy clothes in large quantities and ship them across the border, where they were sold for pesos. Banks were instrumental in identifying suspicious invoices and other red flags, which led to the raids.
In such cases, cooperation between financial institutions and law enforcement is often the key to piecing the puzzle together. When it comes to money, financiers and bankers are in a better position than law enforcement to notice transactional abnormalities, so developing effective channels of communication between the two sides is paramount in the ongoing effort to combat drug traffickers and terrorists.
One area where law enforcement and finance can help each other in the future is in identifying and recognizing evolving trends. For example, Europe is a popular place for Mexican and Colombian drug traffickers to conduct business now because there is a lack of coordination and communication between countries in the European Union that criminals are exploiting.
Recently, federal officials received word that teenagers in a small country in Central Africa called Equatorial Guinea were suddenly driving Maseratis and other expensive cars down the country's dirt roads. Further investigation revealed that both the Sinaloa drug cartel and Colombia's Medellin cartel are now using this small country as a trafficking gateway to Europe.
Why? Because the predominant language in Equatorial Guinea isn't French or Portuguese – it's Spanish.
Though El Chapo is now in custody, the Sinaloa cartel continues to be one of the largest drug distributors in the world. It operates by identifying and exploiting cracks in the social systems that make global civilization possible. While law enforcement is responsible for filling those cracks, cooperation from the public sector – particularly in the finance industry – is an undeniably important factor in the success of this ongoing battle.
FAQs
Money Laundering Attempts of the Cartel
During El Chapo's trial, the prosecution presented evidence that he had used a network of front companies and intermediaries to conduct transactions on his behalf, as well as moving money across international borders to avoid detection.
How does El Chapo launder money? ›
Money Laundering Attempts of the Cartel
During El Chapo's trial, the prosecution presented evidence that he had used a network of front companies and intermediaries to conduct transactions on his behalf, as well as moving money across international borders to avoid detection.
How does Sinaloa Cartel launder money? ›
Narcotics traffickers delivered bulk cash in amounts of up to $200,000 to the employees in hotel rooms and parking lots. Following the delivery of the illegal money, the criminal organization laundered the funds through the shell companies and then transferred the laundered funds to bank accounts in Mexico.
How does the cartel launder money in the US? ›
Drug traffickers do this by buying such easily sold items as clothes or electronics from a legitimate company in the U.S., and then selling the items on the other side of the border for pesos. The money is now effectively clean, and can be used for regular commerce.
Are Chinese money launderers helping Mexican drug cartels? ›
In another example, between 2008 and 2019, Xizhi Li, a Chinese businessman with US citizenship, laundered nearly US$30 million of drug proceeds for Mexican, Colombian, and Guatemalan drug trafficking organizations via a casino in Guatemala, a US seafood export company as well as US and Chinese bank accounts.
What is the biggest money laundering case? ›
Wachovia Bank
Once one of the largest U.S. banks, Wachovia is unfortunately responsible for the biggest money-laundering event. In 2010, it was found that the bank allowed drug cartels in Mexico between 2004 and 2007 to allow money laundering of close to USD 390 billion through its branches.
How do rich people launder money? ›
What Are Common Ways to Launder Money? The traditional forms of laundering money, including smurfing, using mules, and opening shell corporations. Other methods include buying and selling commodities, investing in various assets like real estate, gambling, and counterfeiting.
How do cartels make dirty money clean? ›
Drug cartels hide their profits by flushing them through the vast global financial market, using various methods including internet payment platforms, cryptocurrencies, payment cards and real estate. Then, they use the laundered cash to underwrite their trafficking.
How do cartels manipulate the economy? ›
Cartels are competitors in the same industry and seek to reduce that competition by controlling pricing in agreement with one another. Tactics used by cartels include reduction of supply, price-fixing, collusive bidding, and market carving.
Do cartels target tourists? ›
Still, experts agree tourists are not the preferred target. “Most tourists will never meet the cartels. In other words, violence is often generic. The violence tourists face is much more local,” Hope said.
The Crypto-Money Laundering Connection
Back in the day, this money shuffling was typically done through anonymous wire transfer services. While they often got away with it, such transfers are far easier for law enforcement and regulators to track. These days, most criminals have moved to using cryptocurrency.
How do criminals use casinos to launder money? ›
Cash-in, cash-out
This is the simplest, most typical method of laundering money at a casino. A criminal simply exchanges their money for playing chips and then converts them back into cash. This way, dirty money can get mistaken for money won at a casino.
In which country most of the money is laundered? ›
According to our extensive research: Approximately $300 billion is laundered through the United States each year. Worldwide, criminals launder between $800 million and $2 trillion each year.
What is the drug cartel capital of Mexico? ›
Sinaloa cartel, international crime organization that is among the most-powerful drug-trafficking syndicates in the world. It is based in Culiacán, Sinaloa state, Mexico.
Are cartels illegal in China? ›
In China, cartel conduct is mainly regulated under the Anti-monopoly Law of the People's Republic of China (the “AML”), which came into force in 2008 and was amended for the first time in 2022. The amended AML has been effective since August 1, 2022.
Does the US import drugs from China? ›
Chinese firms have become major suppliers of US pharmaceuticals. Since 2020, US imports of Chinese pharmaceuticals (defined by the US tariff code to include packaged medicaments, vaccines, blood, organic cultures, bandages, and organs) has grown by 485 percent, going from $2.1B in 2020 to $10.3B in 2022.
What are the top businesses to launder money? ›
Laundering Money Through Cash Businesses
Cash businesses, including car washes, laundromats and strip clubs, are favorites of money launderers. Although these common companies have legitimate operations, they can operate partially or mostly as shell companies whose real business is to launder illegal funds.
What is the maximum sentence for money laundering USA? ›
Federal money laundering penalties
10-20 years in prison. Fines of up to $500,000 or two times the value of the laundered funds.
What is the best currency for money laundering? ›
Privacy coins for money laundering
Monero (XMR) is the most prominent privacy coin. However, some coins like ZCash, Dash, and Litecoin have optional privacy features. Since these cryptocurrencies are more difficult for regulators to detect, they're often preferred in criminal circles.
How do drug dealers launder money? ›
Profits generated from retail drug distribution typically are laundered in the area where the drugs are sold, usually by commingling drug proceeds with legitimate proceeds through cash-intensive businesses and by purchasing high-value items such as luxury cars and jewelry.
So out of the multiple trillions of dollars that are laundered internationally every year, how much of the proceeds of crime are actually seized and forfeited? According to the UNODC, the answer is less than 1 percent.
How do banks detect money laundering? ›
How Can Digital Banks Detect Money Laundering? Detecting money laundering is a strictly regulated process for banks, which includes: Transaction monitoring: This involves keeping a close watch on transactions above a certain threshold.
Can the cartel track your phone? ›
Corrupt Mexican officials have helped drug cartels in the country obtain state-of-the-art spyware which can be used to hack mobile phones, according to a senior DEA official.
Where do Mexican cartels get their money? ›
For years, the Mexican cartels that supply the U.S. market with cocaine, heroin and fentanyl smuggled truckloads of bulk cash to Mexico, where they used banks and exchange houses to move the money into the financial system.
What is a narco bank? ›
Clandestine banking system with large amounts of cash
The modus operandi used by the criminal network consisted in moving large amounts of cash via a sophisticated underground banking system.
What are the 3 types of cartel? ›
Types of cartel activity
- fix prices - when competitors agree on pricing instead of competing against each other.
- market share - when competitors agree to divide a market between themselves so they don't have to compete.
- control output - when competitors agree to limit the amount or type of goods and services available.
For example, one legal cartel is OPEC (Organization of Petroleum Exporting Countries). It oversees the petroleum price changes worldwide. The countries Iran, Kuwait, Iraq, Venezuela, and Saudi Arabia started it in 1960. Later on, a lot of countries all over the world joined this agreement.
What is the main problem of a cartel? ›
Once established, cartels are difficult to maintain. The problem is that cartel members will be tempted to cheat on their agreement to limit production. By producing more output than it has agreed to produce, a cartel member can increase its share of the cartel's profits.
Do cartels kidnap tourists? ›
The evolution of tourist kidnappings in Mexico is closely tied to the history of the cartels, Artemis III said. Popular resort cities like Cancun used to be considered "safe zones" because cartel members and their families used to vacation there just like U.S. tourists, he said.
Are cartels targeting Americans? ›
And while cartels avoid deliberately targeting Americans, their business model rests on shipping narcotics north that have helped fuel an epidemic of drug deaths in the United States.
Although rare, blatant cartel violence in American cities does occur.
How do gangsters launder money? ›
Money laundering is a process that criminals use in an attempt to hide the illegal source of their income. By passing money through complex transfers and transactions, or through a series of businesses, the money is “cleaned” of its illegitimate origin and made to appear as legitimate business profits.
How do hackers steal money without trace? ›
Phishing
With phishing, hackers attempt to steal valuable information by impersonating a trusted source. Phishing schemes can come in several different forms, including phone calls, fake websites and sales emails.
How do criminals cash out Bitcoin? ›
Dark Exchanges
When one type of cryptocurrency is repeatedly exchanged for another on a dark exchange, it can slowly clean the coin. This process allows criminals to safely transfer it to an external cryptocurrency wallet without using a mixing service. Another option is converting cryptocurrency into cash.
How do people launder money in Vegas? ›
In live casinos, dirty money is converted into chips, played with for a short while, then cashed out in the form of a check. Sometimes this is also done through fixed-odds betting terminals (FOBTs) as players play and lose a little bit, then cash out so they have a receipt to show as proof of their 'winnings'.
What is chip walking? ›
Chip walking typically involves a process where criminals bring large amounts of cash to a casino, buy chips, and then "walk" the chips to different tables or areas of the casino to make it appear as though the money is being gambled.
What is Bill stuffing casino? ›
Another common strategy is bill stuffing. In this case, criminals enter a casino, put money into slot machines, and print a bunch of tickets to cash out at the kiosk. While this seems innocent, afterward they wash the money to get rid of tracked serial numbers and reuse it—presumably, for something else illegal.
Who handles money laundering in USA? ›
The United States Department of the Treasury is fully dedicated to combating all aspects of money laundering at home and abroad, through the mission of the Office of Terrorism and Financial Intelligence (TFI).
What countries do not recognize money laundering as a crime? ›
Contact: Anthea Lawson +44(20) 7492 5882 or +44(0)7872 620855. Note to editors: The FATF has named 8 countries as not having sufficient money laundering regulations in place: Iran, Angola, North Korea, Ecuador, Ethiopia, Pakistan, Turkmenistan, São Tomé and Príncipe.
How much money is considered money laundering? ›
A: Under US Code Section 1957, engaging in financial transactions in property derived from unlawful activity through a US bank or other financial institution or foreign bank in the amount greater than $10,000 is considered a crime under money laundering.
Under the leadership of Joaquín Guzmán Loera—commonly known as El Chapo (“Shorty”), the Sinaloa cartel emerged as one of the world's most powerful drug cartels in the early 21st century; according to various reports at the time, it accounted for the majority of illegal drugs in the United States.
Is Cancun safe from cartels? ›
Only two states have the all-clear, Yucatan and Campeche, near Cancun. Visitors to Quintana Roo — including Cancun, Playa Del Carmen and Tulum — are advised to be vigilant. Increasingly, Mexico is effectively a narco-state, according to one former U.S. national security adviser.
What city in Mexico has the most cartel activity? ›
As the main entry point for drugs coming from South America, Tijuana is a hotbed of cartel activity. Being close to the border with the United States, it is also a major center for human trafficking and organized crime. Tijuana is also considered the most dangerous city in the world, according to homicide rate stats.
Do any cartels still exist? ›
As of 2023, the Sinaloa Cartel remains Mexico's second most dominant drug cartel.
What is the punishment for drug smuggling in China? ›
In China, sentencing for drug trafficking could include capital punishment. For example, the seizure of 50 grams or more of heroin or crystal methamphetamine could result in the use of the death penalty by the Government.
What are cartels and why are they illegal in the United States? ›
In the United States, cartels are usually considered illegal under antitrust laws. In criminal law, cartel refers to a drug cartel. A drug cartel is a criminal organization that controls the promotion and distribution of narcotic drugs. Some drug cartels are known to finance terrorist organizations.
Where does the US get most of its drugs? ›
TABLE 2: Quantity of Pharmaceutical Imports to the U.S. by Country of Origin (2021)
| Country of Origin | Quantity (kilograms) | Percent of Total |
|---|
| China | 190,925,360 | 23.6% |
| Mexico | 149,587,712 | 18.5% |
| India | 117,611,862 | 14.5% |
| Canada | 71,296,029 | 8.8% |
6 more rowsJan 9, 2023
The active pharmaceutical ingredients for Adderall are primarily produced in China and India, subject to FDA regulatory oversight. However, the FDA lacks full visibility into these foreign suppliers' production capacity and quality standards, posing risks to Adderall's availability and safety.
What country produces the most pharmaceutical drugs? ›
Pharmaceutical products are the world's 6th most traded product. In 2021, the top exporters of Pharmaceutical products were Germany ($115B), Switzerland ($90.2B), United States ($81.6B), Belgium ($71.1B), and Ireland ($70.6B).
How do drug traffickers launder money? ›
Profits generated from retail drug distribution typically are laundered in the area where the drugs are sold, usually by commingling drug proceeds with legitimate proceeds through cash-intensive businesses and by purchasing high-value items such as luxury cars and jewelry.
The Cali Cartel laundered hundreds of millions of dollars through a gold-buying scheme. Drug money deposited in Italian banks was used to buy gold bullion. The gold was then sent to Panama, where it was sold off for cash.
How much money did El Chapo steal? ›
He is considered to have been one of the most powerful drug traffickers in the world. Life in prison without the possibility of parole plus 30 years, must forfeit assets worth more than $12.6 billion. Attorney General of Mexico, the Drug Enforcement Administration, and numerous sub-national entities.
What do cartels do for money? ›
For years, the Mexican cartels that supply the U.S. market with cocaine, heroin and fentanyl smuggled truckloads of bulk cash to Mexico, where they used banks and exchange houses to move the money into the financial system.
What do criminals use to launder money? ›
Criminals will often buy a piece of real estate using cash from illegal activity and then quickly sell it, depositing the proceeds into a legitimate bank account. They may have a third party buy the property or use shell companies to make the purchase.
How do cartels hide money? ›
Drug cartels hide their profits by flushing them through the vast global financial market, using various methods including internet payment platforms, cryptocurrencies, payment cards and real estate. Then, they use the laundered cash to underwrite their trafficking.
What are the most common money laundering businesses? ›
Cash businesses like laundromats, vending machines, restaurants, lawn services, car washes, and street vendors are often used to launder money. Because of the large amounts of cash flowing into the business already, it is harder to prove that dirty money is being cleaned with these businesses.
What drug lord made the most money? ›
Pablo Escobar (1949–1993) remains publicly the most powerful and wealthiest drug lord in history.
How much of El Chapo's money was seized? ›
After sentencing Joaquín "El Chapo" Guzmán to life in prison plus 30 years, the United States ordered a forfeiture of $12.6 billion worth of his assets.
Did Mexican president take money from El Chapo? ›
[What you need to know to start the day: Get New York Today in your inbox.] The former president of Mexico, Enrique Peña Nieto, took a $100 million bribe from Joaquín Guzmán Loera, the infamous crime lord known as El Chapo, according to a witness at Mr. Guzman's trial.
Do cartels use Bitcoin? ›
After splitting drug proceeds into small payments to avoid controls, the cartels “then use those accounts to buy a series of small amounts of bitcoin online, obscuring the origin of the money and allowing them to pay associates elsewhere in the world.”
